Federal pay has been frozen since December 2010, when Congress signed off on an Obama administration proposal to freeze federal worker pay for two years in the name of deficit reduction.

The administration is expected to release its new budget in February, and any proposed increase in federal pay will require the approval of Congress.

Even if it does become law, the 0.5% increase would still lag far behind inflation, which is up about 3.4% over the past 12 months. Over the same time period, private sector wages have bumped up by more than 2%, according to the Bureau of Labor Statistics.

Colleen Kelley, president of the National Treasury Employees Union, which represents 150,000 employees in 31 agencies and departments, expressed disappointment at the size of the raise.

"The good news is that the pay freeze is ending, but I am disappointed at the size of the proposed 2013 increase," Kelley said in a statement.

The average federal worker makes around $75,000 a year, and a 0.5% increase would result in a pay raise of about $375, or $7 a week.

For one federal worker, the proposed increase sparked mixed emotions.

"When you put it into perspective, it's so small it's almost a slap in the face," said Randy Esperanza, an IRS employee based in Los Angeles.

Esperanza is a young worker who says he's just happy to have a job in this economy, and he'll take the raise if Congress approves.

"It's always good to get a bigger increase," he said. "But it's frustrating because there are a lot of other things that could be cut out and are wasteful."

During the freeze, federal workers remained eligible for bonuses as well as promotions along the federal step ladder system. Those promotions are based on job performance and time spent in the position.

When he first proposed the freeze, Obama said the cut was the first of many.

"The hard truth is that getting this deficit under control is going to require some broad sacrifice," Obama said. "And that sacrifice must be shared by the employees of the federal government."

The White House initially estimated the two-year pay freeze would save $2 billion during fiscal year 2011 and $60 billion over a ten-year time period.

But federal workers have remained in the crosshairs of some spending conscious lawmakers, who have proposed extending the pay freeze or reducing the size of the federal workforce to free up federal funds.

Those proposals have met resistance from federal employee unions, who called news of the proposed pay increase "a breath of fresh air."

"Although we would have preferred a larger increase as prescribed by law, it is nonetheless a welcome development that the magnitude of federal employees' sacrifice in recent years is being acknowledged," William Dougan, president of the National Federation of Federal Employees, said in a statement.